HRA Calculator
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What is HRA and How is it Calculated?
House Rent Allowance (HRA) is an allowance granted by an employer to an employee for covering the cost of their rental accommodation. Under Section 10(13A) of the Income Tax Act, a portion of the HRA can be claimed as an exemption, thereby reducing your taxable income.
HRA Exemption Formula:
The HRA Exempt Amount is the least of the following three values:
- Actual HRA received from your employer.
- Actual rent paid minus 10% of your Basic Salary + DA (Dearness Allowance).
- 50% of Basic Salary + DA if you live in a Metro city (Delhi, Mumbai, Kolkata, Chennai) or 40% of Basic Salary + DA if you live in a Non-Metro city.
Tips to Maximize Your HRA Exemption:
- Have a valid rent agreement: Ensure you have a signed rent agreement with your landlord. It should clearly state the monthly rent, period of tenancy, and any other terms.
- Pay rent via a traceable method: Pay rent through a bank transfer, cheque, or UPI to have a record of the transaction.
- Get your landlord's PAN: If the annual rent paid exceeds ₹1,00,000, you are required to furnish your landlord's PAN (Permanent Account Number).
- Claim HRA for parents: If you live with your parents and pay them rent, you can claim HRA exemption. This requires a valid rent agreement and proof of rent payments.
